President signs law to cap rent hikes

Casa Presidencial says that the new law that ties rent increases to the rate of inflation will not go into effect until the first of the year.

The summary of the new law came as President Luis Guillermo Solís signed the measure in a ceremony.

The law will prohibit owners from raising rents over the course of a rental agreement more than the inflation rate as long as the rate is less than 10 percent.

The current law provides for a 15 percent ceiling per year because when it was passed the expectation was that the colon would continue to inflate. But the currency has been stable because the Banco Central is protecting the colon.

Rental agreements in foreign currencies already are frozen at the initial rate over the length of the agreement, which usually is three years.

The measures does not apply to vacation rental.

There is a possibility that landlord organizations will challenge the new law in the courts. And some have already said that the owner will set the initial rent high enough to compensate for the inability to get substantial annual increases.

When the inflation rate is higher than 10 percent, the government in the form of the Ministerio de Vivienda y Asentamientos Humanos would be empowered to set the cap.

President  Luis Guillermo Solís displays his signature on the rent capping bill.

President Luis Guillermo Solís displays his signature on the rent capping bill.

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